FBOs: Similarly-Situated and Rates and Charges For FBOs, the second important point of Economic Non- Discrimination is spelled out in paragraph (c). Sponsors must charge the same rates, fees, rentals and other charges as are uniformly applicable to other FBOs making the same or similar use of the airport and utilizing the same or similar facilities. The FAA calls these “similarly-situated” businesses. If one FBO specializes in services to large busi- ness jets and another FBO’s business is focused on piston aviation aircraft, then these FBOs will, most likely, not be considered similarly-situated and the airport sponsor could be justified in charging different rates and fees. The FAA recommends (but does not require) that airports establish minimum standards for facilities and services in order to level the playing field and avoid charges of unfair favoritism of one business over another. Minimum stan- dards that are fair and reasonably crafted are very help- ful to making sure those FBOs and other airport-based businesses have made the necessary investments in infra- structure, people and equipment that will allow them to provide high-quality and safe services to customers. Airport Sponsors: Exercising a Proprietary Exclusive An airport sponsor may elect to be the sole provider of services at an airport; this is known as exercising a “pro- prietary exclusive.” In doing so, the airport sponsor must meet the same conditions and requirements that it requires of FBOs; for instance, it must also use its own facilities and employees to provide the services. This prevents the airport sponsor from claiming all the fuel profits for itself without investing in the facilities and employees it would require of any other FBO. When an airport sponsor elects to imple- ment a proprietary exclusive by removing an independent FBO, there are also contractual considerations. Although the grant assurances permit the airport to exercise a proprietary exclusive, this does not give the airport sponsor the right to cancel existing leases or use agreements mid-stream. It must wait out the term of existing FBO agreements until they expire (or attempt to buy out an existing provider). FEE AND RENTAL STRUCTURE (GRANT ASSURANCE #24) The Fees and Rental Structure grant assurance is inter- twined with Economic Non-Discrimination. First, airports must structure their fees and rents to be as self-sufficient as possible under the circumstances. Just as important, an airport’s fees and charges must be fair, reasonable and not unjustly discriminatory under the circumstances. If fees and lease terms are not set fairly and reasonably, then they create the opportunity for airport businesses and users to be charged unfairly—either too high or too low. Airports must have fair and reasonable charges for the aeronautical use of airport. However, airports are not required to charge fair market value to aeronautical enti- ties. By comparison, when non-aeronautical businesses use airport property, they must pay fair market value. ‘Fair market value’ means the rental rate for a comparable piece of property used for a similar purpose that is not at the airport. Even if a business is considered an aviation sup- port business in the industry sense of the term and if its activities do not require it to be located at the airport, then it is not considered an aeronautical entity. For example, a caterer specializing in food and beverages for airlines and air charter is not an aeronautical entity because its products can be produced offsite and delivered to the customer by truck. The failure to charge fair market value to non-aeronautical entities is a missed opportunity to be self-sustaining.4 The airport also fails to be self-sufficient if: fee and rental struc- tures were not updated for more than 15 years; there is no basis for lease rates used; and, airport property is permitted to be used without lease agreements and compensation.5 The FAA won’t police fees and charges—whether charged by the airport to the FBO—or charged by the FBO to the customers. The FAA has long made it clear that it is not in the business of economic regulation of FBOs, although it will get involved in assuring that the principles of the grant assurances are adhered to when 4 Office of Inspector General Audit Report, Use of Airport Revenue Denver International Airport, Report Number: AV-1999-052, January 27, 1999. 5 Office of Inspector General Audit Report, Use of Airport Revenue Denver International Airport, Report Number: AV-1999-052, January 27, 1999. Continued on page 41 Aviation Business Journal | 2nd Quarter 2018 39
